Global markets plunge with Greek government on brink of collapse

Tuesday, November 1, 2011

By Paul Martin

Global markets plunged as the Greek government teetered on the brink of collapse, while the country’s Prime Minister said that his controversial referendum will offer a “clear mandate” on whether Greece stays in the EU.

European stockmarkets led a global rout in the wake of Greece’s shock decision to call a referendum on the bail-out agreed last Wednesday.

Credit rating agencies and bondholders said the risk of a disorderly Greek default had soared, threatening the agreements made in Brussels on bank re-capitalisations and bond haircuts.

A crisis cabinet meeting was called in Athens on Tuesday amid demands for Prime Minister George Papandreou’s resignation. Opponents of the Greek premier derided his calling a referendum as an “act of unprecedented irresponsibility”. Mr Papandreou said his government would face a vote of confidence on Friday night.

Early defections pointed to a knife-edge vote that would trigger a snap election if the prime minister lost. Mr Papandreou said that snap elections would risk default, and believes that the market turmoil will be short-lived.

Evangelos Venizelos, the Greek finance minister and obvious successor, was hospitalised on Tuesday suffering from stress and stomach pains.